Lord Londesborough (CB)
My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and declare my interests as an adviser and investor in start-ups.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Innovation and Technology (Baroness Lloyd of Effra) (Lab)
My Lords, the latest ONS figures highlight the continued resilience of UK entrepreneurship. One-year survival rates have also remained strong, holding at over 93% in recent years. Furthermore, the percentage of adults starting or running a new business in the UK in 2024 was 14%, as opposed to 12% in 2023, remaining above France, Germany and Italy. This underscores the ability of new British firms to establish themselves successfully.
Lord Londesborough (CB)
I thank the Minister for her response, but I think it is fair to say that key data on our start-ups is missing in action. Since the enterprise investment scheme was introduced 30 years ago, I have calculated that £40 billion has been invested in EIS start-ups, triggering £12 billion in tax credits. I declare an interest in that I am a beneficiary. And yet what has been the economic impact? What is a true success rate of these start-ups? How many permanent jobs have been created and sustained? What is their net contribution to GDP? And what is the return on investment of that £12 billion from the public purse? If the Minister is unable to answer these questions, can I suggest that her colleagues at the Department for Business and Trade knock heads with the ONS so that they can produce this data?
Baroness Lloyd of Effra (Lab)
The evidence from HMRC’s 2022 evaluation shows that 75% of enterprise investment scheme companies strongly agreed that finance led their company to grow. As the noble Lord is aware, in the Budget the Government introduced an entrepreneurship tax package to support innovative young companies, doubling the eligibility of the EIS. At the same time, the Treasury is running a call for evidence to gather evidence on how well existing support is working, including the EIS, and on options for further support. The questions that the noble Lord asked will be addressed, at least in part, by the consultation that the Treasury is launching now.
Baroness Kingsmill (Lab)
My Lords, I too have been very much involved in start ups, including chairing a fintech. At the moment, the real issue for start-ups is scalability. I wonder what the Government can do to assist companies and the brilliant entrepreneurs that we produce in this country in scaling up their businesses.
Baroness Lloyd of Effra (Lab)
My noble friend raises the equally important point that, as well as supporting start-ups, we need to support scale-ups. One initiative that the Government have taken is the entrepreneurship prospectus, which takes action on four important areas that create the ecosystem for companies not only to establish themselves but to thrive. That includes: on R&D, focusing public research firepower on priority sectors; changing the procurement rules and approach so that the Government are a better customer for innovative businesses, which is something that scale-ups often raise with us; the changes to tax reliefs, which I mentioned; and strengthening the ability of public finance institutions to invest at series B and beyond.
Lord Popat (Con)
My Lords, many SMEs and start-up businesses are facing a challenging time, not just because of high taxation but because they are heavily regulated as well. To open a bank account can take as much as three months, registering VAT takes time and a contract with a lawyer could be as much as 60 pages. Can the Minister give us an assurance that the Government will look into all this? We should genuinely be celebrating wealth creation and help our GDP.
Baroness Lloyd of Effra (Lab)
The UK has an extremely strong track record as a vibrant ecosystem for start-ups and scale-ups, and that is something the Government are committed to building on—hence, as I mentioned, the entrepreneurship package. Specifically on regulation, we are not sitting still on that either. We have announced, as part of our regulation action plan, a commitment to reduce the administrative burden on all businesses by 25%. We have already announced several specific measures to ease the regulatory burden for smaller companies. For example, we announced in October 2025 that we would exempt tens of thousands of companies from producing strategic and directors’ reports. We are looking carefully across all departments at how we can optimise regulation. In addition, through the Regulatory Innovation Office, we are looking at how to regulate new technologies that perhaps do not fit within the existing regulatory purview, such as drones or novel foods.
Lord Fox (LD)
My Lords, I am pleased to hear that the Government are going out and looking for evidence. I want to add another sector that has not really been mentioned here. From my meetings with businesses, there is a whole section of businesses—a large lump—with perhaps 100 employees, which are successful and are doing well, and are often family owned or privately owned, but they find it difficult to get the capital they need, not to turn themselves into unicorns but perhaps to double in size or get half the size again. Can the Minister take on board that sector? Can she discuss with colleagues how those firms can get access to the finance they need? That incremental growth would make a big difference to our economy.
Baroness Lloyd of Effra (Lab)
As noble Lords may know, we are supporting our public finance institutions. We are increasing the capitalisation of the British Business Bank, which can play a role in this area, complemented by the National Wealth Fund’s new mandate, which includes a focus on other sectors such as digital and technology. As the noble Lord is aware, we are also acting over the longer term, which may take a little longer, to increase the amount of capital that domestic pension funds can allocate to private assets, including through the Mansion House Accord and the Sterling 20 group, in order to continue to support businesses getting access to finance in the UK.
Lord Bilimoria (CB)
My Lords, I am a member of the expert advisory council of the Government’s Help to Grow: Management scheme set up by Rishi Sunak when he was Chancellor, which this Government have happily continued. Some 10,000 businesses have graduated from this, but is the Minister aware that only businesses with five to 249 employees are eligible for the scheme? Micro-businesses, including start-ups, which make up 90% of SMEs in this country have fewer than five employees and so are not eligible for this programme. Will the Government consider expanding this very successful programme to include micro-businesses?
Baroness Lloyd of Effra (Lab)
I am happy to take away that question and consult with colleagues on it. The noble Lord is right that businesses of all sizes make up the huge vibrancy of our economy and we must think about the right intervention from government and the private sector to help them to grow.
Lord Clarke of Nottingham (Con)
My Lords, if the Government are as keen on entrepreneurship as the Minister keeps suggesting, why did the Chancellor in her last Budget reduce the tax relief for venture capital trusts, which I set up in my last Budget in 1997 precisely to encourage the kind of investment she is so enthusiastic about?
Baroness Lloyd of Effra (Lab)
I thank the noble Lord for his question. We expanded the eligibility for various schemes to support entrepreneurs and scale-up businesses such as the enterprise management incentives and the enterprise investment scheme. I will need to consult with Treasury colleagues specifically on venture capital trusts, because I believe that we increased the investment limits for venture capital trusts but the nature of his question suggests otherwise.
Lord Hunt of Wirral (Con)
My Lords, does the Minister share my concern that an increasing number of entrepreneurs are saying that Britain is becoming an increasingly unattractive place to grow a business? Given that AI start-ups, in particular, depend on access to powerful data centres for success, the principal barrier that she could address is that we have the highest electricity prices in Europe. Will she now set out a clear strategy to reduce electricity costs so that AI companies can realistically build scale and remain in Britain?
Baroness Lloyd of Effra (Lab)
Our approach to the AI opportunity is comprehensive. It includes the AI growth zones which are being announced and include full access to energy as part of the package as well as local skills packages of £5 million per area to ensure that local areas benefit from these AI growth zones.